Q1 2019 presentation · 2019-04-25 · NOK million 0 1 000 2 000 3 000 4 000 5 000 ... • Awaiting...
Transcript of Q1 2019 presentation · 2019-04-25 · NOK million 0 1 000 2 000 3 000 4 000 5 000 ... • Awaiting...
Q1 2019 presentation
25 April 2019
Customers
Logistics• More than 40 years of wholesaler experience
• Efficient set-up and nationwide reach
• New modern central warehouse from Q2 2019
Marketing
3
Sourcing
Stores
• From more than 30 countries
• Pan-Nordic agreement with ÖoB and Tokmanni
• Over 1 million leaflets in distribution
• More than 300 000 subscribers to digital newsletter
• Cost-efficient locations and operations
• 224 of 238 like-for-like (LFL) stores profitable in 2018
• Track-record of 15 new or relocated stores p.a.
• 31 million customer transactions in 2018
• Widely recognised brand and price position1
1 Mediacom annual market survey
Norway’s #1 discount variety retailer
261Stores
Europris – a growth story
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NOK million
0
1 000
2 000
3 000
4 000
5 000
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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
25 years of
growth
Store #250
Listing
on
Oslo
Børs
JV with
Tokmanni
and opened
Shanghai
sourcing
officeAcquired by
Nordic Capital
Central
warehouse
opened in
FredrikstadStore
#150
Acquired by
IK
Investment
Partners
Store #100
Founded by
Wiggo
Erichsen
Wholesale
agreement with
Terje Høili AS
• Strong top line growth driven by number of customers
• Sales negatively affected by around 5% (NOK 60m) because of the
timing of Easter
• Comparable figures per 4th week of April - mid-single-digit LFL growth
• Group revenue for the quarter was NOK 1,237m (NOK 1,199m)
• Stable gross margin at 41.4% (41.2%)
• OPEX affected by increased costs related to high fill-rate at the
central warehouse, additional costs of NOK 11m
• Promising introduction of first Europris City concept store
• New warehouse on schedule – first operations to start during
May
• Adjusted net loss of NOK 24m (profit of NOK 9m)
•Adjusted net profit (NOK million)
•Group revenue (NOK million)
1 237
1 199
Q1 2019 Q1 2018
Highlights in the first quarter
-24
9
Q1 2019 Q1 2018
5
Retail sales per quarter (NOK million)
1263
1536
1417
1952
1279
Q1 Q2 Q3 Q4
2018 2019
• Total retail sales growth of 1.3% in Q1, well above total
market growth of 0.3%(1)
• Timing of Easter distorts comparability
• Number of customers is the main growth driver
• Continued capitalisation on the efforts to increase central
control of volumes and spacing in the stores
• Focus on implementing the weekly sales campaigns• Reduce sold-out conditions
• Improve customer satisfaction and price position
(1) According to Kvarud Analyse shopping centre index
Sales performance
6
-0,6 %
0,8 %
-0,8 %
2,2 %
-1%
0%
1%
2%
3%
4%
Q1 2019 2018
Market Europris
Y-o-Y LFL growth (%)
1.4-0.2
Total growth development LFL development
Europris growth rate in excess of market growth rate in the period% points
Source: Kvarud analyse, Shopping Centre Index and Europris
0,3 %
1,3 %1,3 %
5,3 %
0%
1%
2%
3%
4%
5%
6%
Q1 2019 2018
Market Europris
1.0 4.0
Comparability affected by timing of Easter
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Be the best discount variety retailer in Europe
8Fogra Reklamefoto
Refining Handyman category to improve sales
and profitability
9
Assortment optimisation
Redesigned packaging
Campaign development
Revitalised marketing
Improved in-store
communication
In-store optimisation
Our proven
category
management
tools
New product ranges in the Grocery category
10
Non-prescription medications and health care
Bijouterie
Bijouterie
Europris City store concept introduced
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• First City concept store opened in March
• Gunerius shopping centre, down town Oslo
• Sales space of 400 sqm
• Streamlined product range focused on:
• Consumables
• Home and interior
• Terminals for on-line shopping
• Europris explore potential for further City stores
Developing the store estate
• One new store opened in the quarter
• Gunerius, down-town Oslo
• One store expansion in the quarter
• Stord in Hordaland county
• 12 stores in pipeline for 2019 and beyond
• Six new stores expected in 2019
• Four of the stores are subject to local authority planning
processes
• The store at Grini in Akershus is at risk
• According to local municipal authorities the store operates in
violation with local planning permissions
• Awaiting final decision from the court
• Risk for lost annual sales of NOK 51m and one-off costs in the
range NOK 5-8m
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Opening of Europris City, Gunerius
- Main production sites
- Buffer storage
- 3PL handling
Entering the transition period for the new warehouse
From inefficiency (2019) To efficiency (2020/2021) To Nordic retail best practice (2021/2022)
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Overview of the transition period
Timeline is based on estimations as of Q1 2019 14
• 1 May: Take over of new warehouse in Moss
• Q2: Operation start in low-bay area. Start testing of high-bay automation
• Q2: Lease expires at one small warehouse in Fredrikstad
• Q3: Lease expires at the second largest warehouse in Fredrikstad
2019
• H1: Operation start in high-bay area
• H1: Lease expires at two smaller warehouses in Fredrikstad
• H2: Start testing of automation in low-bay area2020
• H1: Start of automated shuttle solution in low-bay area
• H1: All distribution out of the new warehouse in Moss2021
• 28 Feb: Lease expires at the largest warehouse, Øra in Fredrikstad2022
Financial review
• Gross margin was 41.4% in Q1 2019 vs. 41.2% in Q1
2018
• Timing of Easter distorts comparability
▪ Last year includes sales of lower margin seasonal products
• Effect of the changes in sugar tax:
▪ The increase in sugar tax in 2018 had a positive effect of
NOK 12m, of which NOK 5m was booked in Q1
▪ The reversal of the sugar tax in 2019 had a negative effect of
NOK 8m, of which full effect was booked in Q1
Gross margin
41,2 %
43,8 % 43,6 % 43,4 % 43,1 %41,4 %
Q1 Q2 Q3 Q4 FY
2018 2019
Gross margin development
16
• OPEX in % of revenue was 31.3% in Q1 2019 vs.
37.3% in Q1 2018
▪ Adjusted for IFRS 16 effect, the OPEX ratio was 39.5%
• Number of directly operated stores increased from 211
to 224, up by 6.2%
• High fill-rate at central warehouse causes capacity
constraints
▪ Early arrival of summer seasonal products, late Easter and
too high base-range inventory in some categories
▪ Extra use of 3rd party handling, personnel costs and container
rent amounting to NOK 11m
▪ Corrective actions taken, but will take 3 to 6 months
▪ Expect additional costs of around NOK 15m in Q2 and
NOK 5-10m in Q3
OPEX in % of group revenue
37,3 %
30,0 %
34,8 %
26,9 %
31,6 %31,3 %
Q1 Q2 Q3 Q4 FY
2018 2019
OPEX development
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• EBITDA was NOK 125m in Q1 2019 vs NOK 46m in Q1
2018
▪ Adjusted for IFRS 16 effect, the EBITDA was NOK 23m
• EBITDA affected by timing effects and one-off’s of
around NOK 35m
• Timing of Easter
• Changes in sugar tax
• Increased OPEX following the high fill-rate at central
warehouse
EBITDA (NOK million)
46
197
119
304
666
125
Q1 Q2 Q3 Q4 FY
2018 2019
EBITDA development
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Cash flow
• Cash flow in the quarter reduced from last year due to
increased inventory at the central warehouse
• IFRS 16 has no net cash effect
• Cash from operating activities increase
• Cash used in investing activities increase
• Cash from financing activities decrease
Cash flow, NOK million
Q1
2019
Q1
2018
FY
2018
Cash from operating activities (301) (298) 350
- of which change in net working capital (343) (260) (169)
Cash used in investing activities (73) (24) (92)
Cash from financing activities (43) (1) (413)
Net change in cash (417) (323) (155)
Cash at beginning of period 427 582 582
Cash at end of period 10 259 427
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• Continued growth in long-term revenue and profits supported by the
group’s leading position in an expanding retail segment
• Short-term impacted by higher OPEX related to capacity constraints
at central warehouse
• Transforming Europris to an omni-channel retailer through e-
commerce and e-crm
• Healthy pipeline of new stores
• Twelve stores planned for 2019 and beyond
• One franchise takeover completed in April and 1-2 additional
takeovers expected during 2019
Outlook
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On the quest to be the best
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The goal is to be the best in all four areas below
Price
Concept
Value chain and cost
efficiency
Execution and culture
Number 1 in price perception in Norway, the fight for lower prices continues
Continuous development, focus on customer need-based flow and distinct shop-in-shop
Nordic sourcing, new warehouse and automation of operations to improve further
Continue to build on our strong company culture and dedicated employees
Q&A
Next event: Q2 presentation 12 July 2019
22
Appendix
Sales days and store projects
Analytical information
APM’s
Appendix
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Number of sales days
Note: Number of projects in 2019 is a moving target, and is subject to change during the year based on operational considerations. An updated view will be presented during the quarterly presentations going forward
Year Q1 Q2 Q3 Q4 Total
2017 77 71 79 79 306
2018 75 73 78 80 306
2019 76 71 79 80 306
2020 77 72 79 79 307
•Number of store projects (franchise projects in brackets)
2019E Q1 Q2 Q3 Q4 Total
New stores 1 4 1 - 6
Store closures - - - - -
Relocations - 3 (1) 3 6 (1)
Modernisations 7 2 5 (1) 1 15 (1)
Sales days and store projects
2018 Q1 Q2 Q3 Q4 Total
New stores 2 4 1 2 9
Store closures - - - 1 1
Relocations 2 1 (1) 2 (1) (1) 5 (3)
Modernisations 5 2 1 1 9
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Analytical info1
1 All figures are approximations and subject to change without further notice 26
Seasonality • As rule-of-thumb, the Easter impact is approximately NOK 50 million in revenue and NOK 10 million of
EBITDA
Quarterly OPEX• As rule-of-thumb, OPEX in year ago quarter + inflation + NOK 1.5 – 1.6 million per extra directly
operated store (DOS)
CAPEX
• New store – NOK 2.3 million per store (5 per year)
• Relocation – NOK 1.5 million per store (10 per year)
• Modernisation – NOK 1.0 million per store (10 per year)
• Category development – NOK 10 million per year
• IT & Maintenance – NOK 35 million per year
Estimated one-time
CAPEX items 2019• New warehouse and new head office of approximately NOK 30 million (IT, system integration, fixtures
and fittings)
Analytical info: New warehouse
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NOK million Q1 2019 Q2 2019 Q3 2019 Q4 2019 2019 2020 2021 2022
Investments
IT, office equipment and other
(CAPEX) ~10 ~5 ~15 ~5
Automation, part 1 (lease)15 ~25 ~30 ~40 ~110 ~5
Automation, part 2 (CAPEX)~20 ~10 ~35 ~65 ~50
OPEX items
Ordinary rent 14 19 19 19 70 71 53 41
Redundant warehouse capacity in
2019 and Øra lease from H2 2021
(lease ends March 2022)
1 4 ~6 0-13 0-5
Non-recurring moving costs 5-10 5-10 3-5 3-5
Alternative performance measures (APMs)
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APMs are used by Europris for annual and periodic financial reporting in order to provide a better understanding of
Europris’ financial performance and are also used by management to measure operating performance. APMs are
adjusted IFRS figures defined, calculated and used in a consistent and transparent manner.
Gross profit represents group revenue less the cost of goods sold excluding unrealised foreign
currency effects.
Working capital is the sum of inventories, trade receivables and other receivables less the sum
of accounts payable and other current liabilities
Opex is the sum of employee benefits expense and other operating expenses.Capital expenditure is the sum of purchases of fixed assets and intangible assets
EBITDA (earnings before interest, tax, depreciation and amortisation) represents gross profit
less Opex.Net debt is the sum of term loans and financial leases less bank deposits and cash
Adjusted EBITDA is EBITDA adjusted for nonrecurring expenses. Directly operated store means a store owned and operated by the group
Adjusted profit before tax is net profit before tax adjusted for non-recurring itemsFranchise store means a store operated by a franchisee under a franchise agreement with the
group
Adjusted net profit is net profit adjusted for non-recurring items Chain means the sum of directly operated stores and franchise stores
Adjusted earnings per share is adjusted net profit divided by the current number of shares,
adjusted by the monthly average of treasury shares
Like-for-like are stores which have been open for every month of the current calendar year and
for every month of the previous calendar year